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Manufacturing revolution is fueled by Silicon Valley innovation

SAN JOSE -- The Bay Area and Santa Clara County have the digital know-how to lead the emerging transformation of factories driven by innovation and customized products, experts and executives said at an industry event Tuesday.

Workers at Futuris Automotive in Newark, Calif., assemble seats for use in the vehicles built by electric car maker Tesla, Thursday, Sept. 11, 2014. Futuris is one of a number of suppliers for Tesla who are relocating to the Bay Area. (D. Ross Cameron/Bay Area News Group) ( D. ROSS CAMERON )

"This is not your father's manufacturing," said Sean Randolph, director of the Bay Area Council's Economic Institute, which released a new report on manufacturing trends at San Jose's Jabil Blue Sky Center, which showcases cutting-edge technologies. "Manufacturing today is leaner, cleaner, it employs fewer people with higher skills."

To be sure, manufacturing has shed a massive number of jobs over the last two decades; from 1990 through 2014, factory employment nose-dived by 39.5 percent. But the positions that remain in California pay much better than they did years ago, according to the report.

Over the last quarter-century, manufacturing wages in California, adjusted for inflation, jumped 42 percent. During the same period, wages for all jobs in California rose 23.6 percent.

"This suggests that the structural shifts that have taken place in manufacturing over the last several decades have resulted in the need for fewer but more highly qualified workers," the Economic Institute report stated.

The average annual wage for a manufacturing job is roughly $80,000, while the average annual wage for all workers in California is about $55,000.

"Manufacturing output is rising, productivity is rising, we are producing more with fewer workers," said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy.

A significant proportion of the manufacturing job losses, Levy theorized, have occurred in lower-end sectors such as basic assembly, textile and apparel manufacturing.

"The winnowing out leaves you with a greater proportion of higher-end industries," Levy said. "So the demand for higher skills in manufacturing creates the basis for increasing wages for the remaining workers."

Manufacturing workers used to have to know primarily how to operate heavy equipment, turn screws or fashion metals. Now, they may need to know not only those legacy skills, but also understand how to run the digital or advanced processes to create robots, 3-D printers, ubiquitous monitors, electric vehicles, medical devices, and other advanced products and systems.

Even with the high cost of living, manufacturing holds an important place in the local economy and in some cases is growing.

"California can be a very challenging place to do business," San Jose Mayor Sam Liccardo said. "But we know manufacturing growth is happening in San Jose."

Last month, Jabil Wolfe, a unit of the conference's host Jabil, signed a 111,000-square-foot lease in San Jose on Optical Court, a move that doubles its manufacturing space.

"Manufacturing matters," said John Dulchinos, vice president of global automation with Jabil, a contract manufacturer of electronic and digital components. "It is a big driver of the current economy. We are on the verge of what will be (a) revolution in manufacturing."

In north San Jose, developer Trammell Crow has launched a 1.1-million-square-foot project that will feature sites for advanced manufacturing and cleantech businesses, part of the city's proposed innovation district in that area.

And in Fremont, the Tesla Motors plant, which replaced the old NUMMI vehicle factory, remains perhaps the most prominent symbol of the transition.

Contact George Avalos at 408-859-5167. Follow him at Twitter.com/georgeavalos.